Originally Published On Nov 03, 2011
Nigeria is blessed, and we have enormous potential to become a rich country. But we are very far from our potential. In 2011, our oil benchmark price was reported as $62 per barrel. If you assume 2.2 million barrels per day were produced in 365 days, and rate of N151 per $, this means Nigeria generated about N7.5trillion from oil in 2011.
Remember 80% of Nigeria’s revenue comes from oil, so in total, we can assume that Nigeria generated less than N10trillion (about $66billion) revenue in 2011. Our budget for 2011 was reported as about N4.2trillion (about $28billion) and I guess the remaining earnings went into things like foreign reserves, emergencies, and perhaps part of subsidy. If average crude oil price in the global market is over $62, the excess revenue goes into the excess crude oil account (now the sovereign wealth fund) and this is saved for infrastructure development but sometimes shared by the three arms of government.
UAE (a country of about 8 million people) makes about the same amount Nigeria makes on oil every year, but they make a lot more income from other sources as tourism, taxes, investments, gas, etc. They made about $60billion revenue in 2009 (over 80% from natural resources) but their dependence on natural resources has reduced a lot in the last two years. Saudi Arabia makes four times what Nigeria makes from oil for a population of about 27m people. Britain’s budget for 2011/2012 was about E711billion (over $1trillion) and their expected income (all from taxes and other remittances, no natural resources) is about E589billion (over $850billion).
Out of the N4.2trillion budget for 2011, Nigeria planned to spend around N1.09trillion on capital infrastructure (about $7billion), representing about 26% of the budget (our ‘De Facto’ Prime Minister said so). It is estimated and reported by newspapers that by the end of 2011, Nigeria would have spent close to N1.5trillion (about $10billion) on oil subsidy though the budget for this was a much lower figure. It hurts deeply every time I read that major parts of this subsidy expense cater for inefficiencies, port challenges and many other amazing things. It also hurts a lot that we have spent billions to rehabilitate our refineries but it seems clearly that these refineries can never work. What can we do?
Friends, Nigeria cannot develop with about $7billion budget on capital expenditure every year. We have so many problems to solve and I personally believe we need more than $200billion every year to be spent on security, infrastructure (health, power, roads, housing, etc), education, investments, etc. The New York Police Department spent over $10billion on security in the years after the September 11 attack. So you can imagine that $10billion is not so high, and we should stop deceiving ourselves that Nigeria is very rich.
I agree with the federal government that it is important to save the estimated N1.5trillion (about $10billion) currently being wasted on oil subsidy every year, but unless they FIRST do the following, Nigerians will not accept: First, our government must annually cut overhead spending by N1trillion and save or recoup N500billion annually from anti-corruption efforts. If they successfully do this for 2 years, saving N1.5trillion (about $10billion) every year to make N3trillion (about $20billion), and we see how they have efficiently and judiciously utilized these funds to develop our country within the 2 years period, then they can come back to us the masses to convince us about subsidy removal. If subsidy is removed, the annual savings will become N3trillion ($20billion). This can build hospitals, security, power, roads and create jobs. In addition to these savings, Nigeria must work very hard to make more income from agriculture, gas, tin, coal, appropriate taxes, etc. We really need a lot of money to develop our country and we should be under no illusions that we are currently rich enough. Overdependence on oil income can crash our economy in future.
We love our government, but they need to do the right thing by leading by example. Please, start CUTTING recurrent expenses, recoup money from anti-corruption efforts, let us see what you do with those savings, then, we can seriously discuss subsidy removal.